25 May 2015

A solution for Greece - a government backed "Bitcoin" pegged to the Euro

The Greek government is looking increasingly threatened by the Shylocks at the IMF and the ECB who want their pound of flesh, and are prepared to do what it takes to break the spirit of the Greek people who voted massively against the system. Default looks increasingly likely.

How can the Greek government manage to find the money to pay its civil servants and pensioners, if they have to find billions of euros to pay the loan sharks?

Well, here's an option. While Bitcoin is not exactly my idea of the perfect money system (it was a great deal for those who gave themselves the right to create them in the first place), what it has done is show that it is perfectly possible to create a totally independent monetary system that can actually work, without the complicity of the banking sector.

I've previously argued that one solution for hardpressed governments like the one in Greece (but also in Spain, Portugal and France) would be to introduce a parallel electronic money system - possibly called the N-Euro - partly because it would stand for National or New Euro, but also because I'm a Neuroscientist! See also my Youtube presentation on the subject.
Setting up such a system could be a bit tricky and complex. So, why not do it with a Bitcoin equivalent. There are now at least 740 different Cryptocurrencies currently in existence,
although only 10 have market capitisations of over $10 million. To the best of my knowledge, none of these systems has government backing.

Perhaps it is the right time for the Greek Government to change this?

My proposal is that the Greek Govenment could decide to pay some percentage of civil servant pay as well as state pensions and welfare in the form of a bitcoin equivalent - perhaps called the N-Euro. Those N-Euros would be valid for paying taxes in Greece (but not elsewhere), which would immediately give the currency a true value, a value exactly equivalent to the conventional Euro system.

The percentage of payments made in N-Euros could be anything - from 5% up. Interestingly, once the system is up and running, people would become more and more happy with the idea of using N-Euros, and businesses would be confident that they can use the currency to pay their taxes and would therefore be able to accept payments using the new currency. At that point, the percentage of the Greek public sector finance that used the N-Euro could be progressively increased, almost without limit.

There are actually a large number of advantages of this approach. One is that the N-Euros would be a true monetary system that does not depend on debt. In this way it would totally different from conventional currencies like the £ and the €. In such cases, up to 97% of the currency in circulation has been created by commercial banks as interest-bearing debt. In my opinion, this is a truly stupid system, that gives enormous power to the banks who get to decide where any new money goes (often to fuel house price bubbles and other asset bubbles). It also guarantees that at least 90% of the population will spend their lives paying interest to the money creators and their allies.

The Greek people and its government could thus be the first to break this system by inventing a truly debt-free money system. And, since the system could be entirely independent from the banks, there is no way that the vested interests could stop them.

Furthermore, since the newly created money would only be used to pay public sector workers to do vital jobs or provide the elderly with pensions, noone could seriously question that this newly created money was being used for important things - a huge difference compared with the situation where only commercial banks get to decide the priorities.

Note that there is a subtle difference between this current proposal and my earlier propositions concerning the N-Euro. Previously, I had proposed that individuals would choose what percentage of their pay (or pension or benefits) should be paid in N-Euros. Here, the percentage would be decided by the government. Given the critical situation, and the real possibility that the IMF and ECB could actually force the Greek government to lay off massive numbers of public sector workers and cut pensions even further, I suspect that few in Greece would object to getting 5%, 10% or even 20% of their income paid in the alternative electronic N-Euro.

Go for it Greece! And, once you have shown that we don't need bank created debt-based Euros, I hope that the system would spread to other countries like Spain and France.

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